The aviation industry has a well-defined differentiated market segmentation framework. Most major carriers flying domestic of international routes have the basic segments of economy, business and first class passengers. Usually the majority of the cabin seating is allocated to cost conscious economy class passengers. These seats are the least spacious, with food and beverages served on trolleys with a predetermined menu. Business class passengers are given an increased level of customer service, better seats and a more spacious arrangement. As the average price for a business class ticket is much greater than an economy class ticket, value added services such as late check-in, extra baggage allowance, and better in flight food and beverages. A first class passenger is willing to pay a premium on flying. First and business class passengers are usually insensitive to small price fluctuations, and are willing to pay a higher price for increased convenience and premium services (Lowe 2008). Other segmentation variables include demographic breakdowns, even lifestyle and values based differentiation. An important factor to also consider is what and airline can offer to its premium customers. Many airlines have rewards or high flier miles programs. The benefits of such programs based on accumulated travels are especially catered to business travelers and individuals who fly frequently. This contributes to improving brand loyalty among customers.
United Airlines uses a form of psychographic segmentation to divide up the market for its services. This involves identifying the social class, lifestyles, opinions, interests, behaviour and attitudes of customers. Modern communication systems play a major part in this information-gathering exercise. With the help of questionnaires, United Airlines classifies its customers by their motivations. For example, some customers choose United Airlines because of price, while others choose the airline because of schedules, frequent flyer programmes or other forms of service. For United Airlines, successful segmentation enables targeting to take place. Targeting provides the focus for the activities of the business. It enables promotions and services to be aimed only at those who are most likely to respond positively to them. Passengers are communicated with through email which is becoming a focus for closely-targeted marketing. The United Airlines business model can be compared to the classic 80:20 rule in Pareto’s Analysis. Based on experience of the airline industry, the model assumes that, for airlines offering a high level of service, 80 of profit comes from 20 of customers. The profit-generating customers are the ones who are prepared to pay a premium price for a premium service. They are the ones that the airline most needs to attract. (Source: Using global segmentation to grow a business )